Explain the psychology
Explain the psychology of currency trading for beginners
While it may seem strange to discuss mental and psychological topics in a forex trading guide for beginners, the truth is that these are some of the most important factors that separate successful traders from unsuccessful ones.
Developed trading rules and the ability to manage your emotions will help you stay calm under pressure at times, enter translations at the right time, and know when to exit – whether you cut your losses, or lock in your profits before then. …the course of the market is changing.
Some basic tips in trading psychology to keep in mind:
1. Keep calm: As exciting as trading can be, it is not without stress. There will be a lot of setbacks on your way to the top. Emotions can force your hand to open a trade too soon and/or close it too late. The main cause of stress and tension in trading for beginners is the fact that some trades will end up losing no matter how hard you try to turn it around – it’s the way the market goes through sometimes. Just remember that a war is not won with a single battle. Instead, it is the overall performance that counts.
2. Understand your risk tolerance: Everyone has a different level of risk tolerance, and this affects the amount of opportunities they gain, the losses they may experience, and the associated psychological impact. To manage stress levels while trading, it is important to consider your risk tolerance in advance and choose trading strategies that support this.
For example, people with less risk tolerance can be more comfortable making lots of small trades and allowing small profits from each trade to accumulate over time. In contrast, someone who takes on greater risks is more willing to make bigger deals, with opportunities for bigger wins (but also bigger losses).
3. Set realistic trading goals: It is important to be realistic with your trading expectations, as this will help you evaluate the best times to open and close trades. Many new forex traders have very high expectations about their potential profits, and this causes them to trade heavily, with large amounts of money and quick, ill-considered decisions. Again, start small to test your knowledge and skills, and as you begin to achieve desired results, you can set bigger goals.
4. Define your limits in advance: Before starting any trade, you must have determined the price at which you will open the trade and the price at which you will take your profit and close it. If the market changes of course unexpectedly, it will incur losses or reduce profits. So once you define these limits, it’s important to stick to them!
Many new traders choose not to close the trade because the market is still moving in the direction they want, and only then lose all their winnings when the trend suddenly changes. If your trade reaches your pre-set target, close it and enjoy your profits. If the market moves in the opposite direction, close the trade or set a stop loss order so that it will be closed automatically if you reach a certain loss limit.
5. Prepare for the worst: While this may sound pessimistic, in trading it is better to prepare for the worst than to expect the best. There have been many times in history that financial markets and individual trading instruments have experienced sudden rises or unexpected falls in value. By considering the worst possible outcome of a trade, you can take measures to protect yourself, should this happen, such as placing a stop loss order in advance.